Creative Destruction in the F&B Industry

Creative Destruction in the F&B IndustryCreative destruction, a term coined by the economist Joseph Schumpeter in 1942, is the concept of “incessant product and process innovation mechanism by which new production units replace outdated ones.” Schumpeter says that disruption is an important part of capitalism because it increases productivity.

As the term suggests, creative destruction isn’t a particularly comfortable concept, especially for those who are on the wrong side of it. The invention of the steam engine led to the creative destruction of travel by horses. The invention of automobiles led to the creative destruction of travel by steam engines. It’s an inevitable result of innovation which can make complete industries obsolete, and take thousands of jobs along with it. The positive outcome is that it creates new industries and redefines jobs within them.

So where is all of this going? McDonald’s recently announced its plan to install self ordering kiosks, thereby reducing manpower in their outlets. It’s not the only company to make a move towards automation. Chili’s Grill and Bar has made a move towards self ordering tablets. Restaurants in the US find automation a way to improve productivity.

There already exists a machine that creates 360 gourmet hamburgers in an hour. The entire machine could replace any human making burgers in the kitchen. According to this report, McDonald’s could fund the development of a burger making machine and see a one year return on investment. There are many reasons why companies are moving towards automating their processes.

In the United States, a big reason for this is the growing cost of labour. Currently, the minimum wage in the US is $7.25 per hour. For a few years now, workers in the F&B industry have protested that this number is far too low for it to be sustainable. They say that the reasonable wage floor should be at $15 per hour. LA recently passed legislation for $15 per hour.

The result of this is that fast food franchises are finding it increasingly difficult to cope with the labour costs. The alternative is to automate. Mundane and repetitive tasks can be done by smart machines. Jobs where human interaction is required, like serving food, can be taken up by people. Another reason why automation makes sense is that it’s more efficient and faster. Queues are shorter, human errors are less common, if not completely erased.

You can see parallels in the F&B industry between the US and countries like Japan and Singapore. On the one hand, labour costs are increasing in the US, forcing companies to automate. On the other hand, Japan and Singapore are facing a labour crunch often due to unwillingness of the countries’ citizens to participate in this industry, leading these countries to automate as well. The story is the same, where labour as a factor of production is being replaced by machines that can do the same work and produce better results. And this is where creative destruction fits in.

What does this mean for the F&B industry? Restaurant technology will develop and will facilitate automation. The hamburger machine by Momentum Machines, Inc is just the beginning in the back-end of a restaurant. POS systems, self ordering kiosks, cloud based scheduling applications and online reservation websites are taking over the work of regular staff in a restaurant. An entire ecosystem of automation surrounding retail and F&B already exists but what will trigger the momentum of creative destruction is the lack of a sustainable solution to the problem of increasing costs: in this case, the cost of labour.

PayrollHero Certification: Hands on Experience with the App

badge-payroll-certificationLast week, Kieran our Head of Client Success, conducted training sessions for the new PayrollHero team members in Singapore as well as a few clients. We got some hands on experience with the app, which helped us gain a deeper understanding of how the product works. As an intern who has been here for a few weeks, my knowledge about the product came from speaking with team members, listening to sales pitches and reading about the product online. So it was an interesting experience to use the product on a demo account and view it from the perspective of a payroll administrator. All new PayrollHero team members get certified on the platform so that they know exactly what the platform can do.

Kieran took us through every aspect of the product. My first thought when I was told about the training was, “Wow, a two and a half day training session? But I already know everything about it!” Which, as you may have guessed, turned out to be highly overstated. Within the first two hours of training, I came to the conclusion that the product was far more powerful than I had expected.

The first day was about Human Resources Information Systems (HRIS). The next day was spent on generating payroll and the final day was dedicated to understanding time, attendance and scheduling using the app.

The interesting part about the app is its customization capabilities. A human resources (HR) administrator can record the company’s organizational chart. The hierarchy allows you to identify employee types and positions. Thresholds allow you to set rules on what kinds of notifications you get based on the activities of employees under you in the hierarchy. The thresholds have multiple permutations and combinations that, once customized, help you prioritize information that you need instantly versus information that can wait till a more suitable time.

badge-tas-certificationIt didn’t stop there. Customization extended to how you segment payroll: employer contributions (CPF, SDL, FWL), bonuses, vacation payments, advance payments, claims that need to be redeemed. Any kind of payment outside of the basic calculation of an employee’s hourly wages can be segmented and customized so that all a payroll administrator has to do, is enter which segment the payment should go into. The app can take care of debiting/crediting the amount to the required account. It will notify you when the account is hitting a pre-recorded limit. The flexibility of the app went as far as allowing you to import data from a spreadsheet, allowing the app to automatically fill in employee details.

While all of this might seem like a rather dry topic to train on for nearly three days, Kieran managed to make the whole session more interesting by throwing in quizzes and having interactive sessions. Every demo account had characters from Kieran’s favourite fiction series. Homer Simpson got a bonus for his outstanding work (let’s pretend like that is EVER going to happen), Sherlock Holmes got promoted to the next level on the org chart, Buffy Summers asked for a change in her schedule for the next 3 weeks and Harry Potter recorded coming in early to work consistently. All these characters were a part of the certification exercises, which made the entire process not only informative but also engaging.

The time, attendance and scheduling part of the course was done through an online training portal on the PayrollHero website. Again, I was pleasantly surprised by how detailed the app was and how customizable the entire process of scheduling was. It was impressive that the app was user friendly and flexible with creating, adjusting or removing schedules based on timing, location and type of work: whether it was a routine desk job or a part time job that required changing schedules often. The app, as was intended, was perfectly designed for retailers and restaurant owners who deal with employees who have erratic schedules which require constant adjustments.

The exercises and quizzes were effective in understanding how much we grasped from the lessons. It was clear that working with app required you to be consistent and methodological with the processes for entering data, giving system permissions, organizing the company’s hierarchy and setting customized options especially since the data that the system works with is sensitive. Finally, the certification undoubtedly served its purpose: it gave us a complete picture of how the app works and how a payroll administrator can benefit by using all its features for time, attendance, scheduling and payroll.

Learn more about PayrollHero Certification in the Philippines and Singapore.